Since the launch of the scheme, the government has given a subsidy of ₹20,983 crore to 832,000 beneficiaries till 21 January 2020. Under the economic stimulus announced in November, the government increased the allocation to CLSS by an additional ₹18,000 crore over and above ₹8,000 crore allocated in the budget.
Ratada Hardik Bhagvanbhai, 25, who is a graphic designer working with an IT firm in Rajkot, Gujarat, took a home loan from a bank in February 2019. After over 19 months of taking the loan, he is still waiting for the subsidy.
The family of Akash Chaturdevi, 49, based in Katni, Madhya Pradesh, has been waiting for even longer. His father took a loan for home improvement in March 2017, when he was told by its bank that he is eligible for the subsidy, but hasn’t received it yet.
The delay would have increased the cost of the loan for those eligible for subsidy. We tell you what the scheme is, what’s causing the delay, how the delay is affecting homebuyers and what’s the way out for them.
As part of CLSS, the government offers an interest subvention of 6.5% (up to ₹2.67 lakh) to those in the economically weaker section (EWS) with annual income of up to ₹3 lakh and in the low-income group (LIG) with annual income of up to ₹6 lakh. Borrowers in the middle-income group with annual income of ₹6 lakh-12 lakh (MIG-I) and of ₹12 lakh-18 lakh (MIG-II) will get a subsidy of ₹2.3 lakh and ₹2.35 lakh, respectively. The credit-linked subsidy is available only for loans up to ₹6 lakh for EWS and LIG categories, of up to ₹9 lakh in case of MIG-I borrowers and up to ₹12 lakh for the MIG-II category.
The process: The borrower applies for the loan to the lender under PMAY with CLSS subsidy. The lender checks the eligibility criteria of the borrower for the loan and subsidy. The lender sanctions the loan and initiates a claim for the subsidy from central nodal agencies (CNAs). Currently, there are three CNAs—Housing and Urban Development Corp. (HUDCO), National Housing Bank (NHB) and State Bank of India. The CNAs cross-check the application and release the funds, which they receive from the government.
“On sanction and disbursement of the loan, the customers application undergoes an audit to check for adherence to the scheme eligibility on grounds of income, property type, geography, ownership etc. If the customer’s application meets all the norms, as per NHB, the claim is submitted to NHB (uploaded on the portal),” said Sumit Bali, president and head, retail lending and payment, Axis Bank Ltd.
The CNAs follow the government guidelines to check the eligibility. “A simple declaration is taken from the borrower with regard to the income and other criteria,” said Deo Shankar Tripathi, managing director and chief executive officer, Aadhar Housing Finance.
So what’s causing the delay? There could be multiple reasons. One, the borrower may not be aware of the eligibility criteria. There are three simple criteria: the borrower should be within the specified income threshold, he or she shouldn’t own a house already and a woman should be the co-owner and co-borrower of the property. “Most of the time the borrowers are not aware of the criteria about women co-ownership of property. They make women as co-borrowers and apply for the loan which leads to rejection,” said Tripathi.
Making mistakes while filling forms could be another reason for the delay. For example, a mismatch in the name on Aadhaar and other documents can lead to delay.
Two, there may be delay in filing of the subsidy claim by the lender. Three, there could be delay in disbursement of funds from the government to CNAs. This year the delay could be due to the pandemic, which also delayed the processing of loan applications.
Four, till 2019, the claims submitted by the lenders were cleared in batches, which resulted in delay. But now it has been changed for faster processing. “Earlier (till 2019), once a batch of claims was uploaded, it was not possible to upload any further claims till the already uploaded claim was processed. This could take some time and result in eligible customers’ claims not getting uploaded or getting delayed for processing,” said Bali.
The government has now streamlined the process for faster processing of subsidy claims with the help of Credit Linked Subsidy Services Awas Portal or CLAP (pmayuclap.gov.in), said Tripathi.
While the launch of the scheme came as a relief for many borrowers, the delay in getting it has in fact increased the cost for homebuyers.
The subsidy is received in the form of lump sum (in case the construction is complete, otherwise it is linked to the stages of construction), which lowers the principal outstanding for the borrower. For example, if a borrower avails a loan for ₹6 lakh, the subsidy will work out to around ₹2.67 lakh, which will be reduced upfront, reducing the loan amount to ₹3.33 lakh. So the borrower will have to pay equated monthly instalments (EMIs) on the reduced amount of ₹3.33 lakh. However, a delay in receiving the subsidy will mean that the borrower will pay the EMIs calculated on a principal of ₹6 lakh, which will increase the overall interest cost of the loan.
Bhagvanbhai is currently paying an interest at the rate of 10% on his home loan. As his subsidy application is underway, he is not able to transfer the loan to another bank where he can get a loan at a lower interest rate.
The borrower can apply for CLSS through the lender. “In case a borrower wants to transfer the loan to another bank or non-banking finance company (NBFC), he or she will have to cancel the application with the current lender and apply for the subsidy again through the new lender,” said Tripathi.
the way out
CLAP can come to the rescue of borrowers, according to experts. The borrower gets an application ID from the lender, using which he or she can check the status on CLAP. The status of the application is also sent to the borrower through SMS as and when there is any action on the claim.
Also, in order to avoid delay, it is important that the borrower clearly understands the criteria and provides all the information correctly to the lenders. In case your subsidy is delayed further, you can write on firstname.lastname@example.org, to understand the reason of delay.
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